quote:

ONE hesitates to step into an argument in which Nobel-prize winning economists are involved but I have been dragged in anyway. Last week's editorial on austerity provoked a response from Paul Krugman; this in turn cited the blog of Brad De Long which quoted this humble hack in evidence against our leader line. (Hi, Brad, and thanks for reading.)

The point at issue is the reaction of bond yields in recent weeks. Martin Wolf, a former and respected colleague, made the case well in yesterday's FT when he wrote that

"Do we believe that markets are unable to price anything right, even the public debt of the world's largest advanced countries, the best understood and most liquid assets in the world? I suggest not. Markets are saying something important. "

Martin was being slightly mischievous there, in that he has frequently argued that equity markets have been mispriced over the last 10 years. Share prices are set by private sector investors whereas central banks, more interested in exchange rate management than in profit maximisation, are huge players in the government bond market. If markets are distorted, government bonds seem as likely a candidate as anything else. But let us accept Martin's conclusion that low bond yields in the US and Germany suggest

"Investors are saying that they view the risk of depression and deflation as greater than that of default and inflation."

Does it necessarily follow that more stimulus, as Professor Krugman suggests, is the logical conclusion? It is equally plausible that investors have concluded that the vast level of stimulus from fiscal and monetary policy has not "worked", in the sense of delivering a vibrant recovery. (I accept that they may have worked in the sense of heading off a depression. But we don't know; the problem with economics is that it is very hard to find counterfactuals.)

My view is best summed up by Stephen King, whose book Losing Control: The Emerging Threats to Western Prosperity, has already been praised on this blog. In his latest note for HSBC, the economist writes that

"The major problem with the Federal Reserve's approach was its failure to recognise that an economy which had become dependent on persistent gains in both asset values and debt was an economy that was likely to be living beyond its means. No matter how much monetary and fiscal policy is loosened, it's likely that an economy in these circumstances will be faced with a prolonged hangover, the consequence of multi-year capital misallocation. Put another way, a period of excessive leverage is typically associated with exaggerated claims about the long-run growth rate of the economy. As a result, the net present value of expected future returns on assets ends up too high, leading to asset price bubbles which eventually burst as economic reality returns. Monetary and fiscal policy may be good enough to prevent a multi-year stagnation from turning into a great depression, but they are unlikely to be powerful enough to deliver a standard recovery in economic activity. Economic stagnation awaits those nations which, for too long, have been profligate. "

In short, we end up looking like Japan, with

"low interest rates in combination with weak or falling asset prices simply a sign that people are more intent on repaying debt."

We are thus a bit stuck. Countries, like Britain, which are already running deficits that are unprecedented in peacetime, have to be careful about the long-term damage they are doing to their fiscal positions. It would be great if the fiscal stimulus were being invested in a way that improved the country's long-term growth rate (the only way out of this mess) but such projects are hard to find.

ocrumsprug posted:

Wouldn't a lower expected CAD$, result in a higher yield on Canadian 10-year bonds?

* bonds

ocrumsprug posted:

Wouldn't a lower expected CAD$, result in a higher yield on Canadian 10-year bonds?

* bonds

Rick Rickshaw posted:

I can't believe I didn't think of posting about it back when we were talking about people living in containers in Saskatchewan.

Lexicon posted:

^ Bonds and the bond market mystify me. Anyone care to explain why Canadian bonds would have a lower yield than American ones? Some sort of elaborate forex arbitrage reason I'm guessing?

Kalenn Istarion posted:

It's because the CDN government is seen as less risky than the US by bond investors. No crazy stuff. Certain large holders of US bonds / currency have also been moving to other securities / currencies like Canada or gold, etc. in the short term this can have a strengthening effect on C$ but rates are generally seen to drive forex over the medium to long term rather than the other way around (low rates => weak FX)

Rick Rickshaw posted:

I can't believe I didn't think of posting about it back when we were talking about people living in containers in Saskatchewan. I think I kind of blocked the whole charade from my mind. I'm going to take a bike down there at lunch to see if they've even started.

If I recall correctly there's a building that needs to be demolished first. I wager a slice of my mother's banana bread that it's still standing - a full year after he first gave them a bunch of money.

Cultural Imperial posted:

http://business.financialpost.com/2014/07/30/albertans-piling-on-debt-faster-than-rest-of-country-as-housing-market-heats-up/

Professor Shark posted:

Would you be willing to say that they're appropriating the counter-culture of living in storage containers?

Kalenn Istarion posted:

It's because the CDN government is seen as less risky than the US by bond investors. No crazy stuff. Certain large holders of US bonds / currency have also been moving to other securities / currencies like Canada or gold, etc. in the short term this can have a strengthening effect on C$ but rates are generally seen to drive forex over the medium to long term rather than the other way around (low rates => weak FX)

Cultural Imperial posted:

We just saw the GDP numbers for the US come out indicating the recovery is well under way. Why do investors see the US as more risky than Canada?

Wasting posted:

Yep, no dangerous asset bubble here. Just plain old jealousy and dumb renters. Just wait until valuations are 100% higher in five years - - that'll shut up all those envious renters at the IMF.

Cultural Imperial posted:

We just saw the GDP numbers for the US come out indicating the recovery is well under way. Why do investors see the US as more risky than Canada?

Franks Happy Place posted:

From this awesome blog:




In short: there is a timeliness component to the relevancy of discussing CMHC behavior in relation to the market.

Rutibex posted:

Because they keep playing ridiculous political games with their debt? I'm sure waiting to the last second, pretending to default, and government shutdowns to make Obama look bad doesn't exactly inspire confidence. That nonsense doesn't happen in Canada; if a party is in power they are in power full stop.

Cultural Imperial posted:

Can you cite any sources? I'm not saying you're wrong. I think your view is interesting but I think you place too much faith in a rational market.

quote:

Metro Vancouver home prices rose 4.4% to $628,600 in July compared with the same month a year ago, according to Real Estate Board of Greater Vancouver (REBGV) statistics released August 5.

Month over month, however, prices were relatively flat given that June’s average benchmark price was $628,200.

The trend toward strong sales continued to hold up prices.

“This is the fourth consecutive month that the Greater Vancouver market has exceeded 3,000 sales,” said REBGV president-elect Darcy McLeod. “Prior to this, our market has not surpassed the 3,000-sale mark since June of 2011.”

McLeod described the market as being in the upper reaches of a balanced market given that the sales-to-active-listings ratio sits at 19.6%.

That’s down from a 21.3% sales-to-active-listings ratio in June but is significantly higher than earlier in the year.

The sales-to-active-listings ratio is a key metric to determine a market’s strength. Conventional real estate wisdom is that a market is considered to be a buyers’ market when the sales-to-active-listings ratio is below 13%. A balanced market exists when the ratio is between 13% and about 21%. It is then considered a sellers’ market when the ratio is above 21% for at least a few months, REBGV president Ray Harris explained to Business in Vancouver earlier this year.

New listings for detached, attached and apartment properties in Metro Vancouver totalled 4,925 in July. That’s a 1.5% increase compared with the 4,854 new listings in July 2013 and a 7.8% decline from the 5,339 new listings in June.

All regions saw price increases.

East Vancouver was the best performing part of the Metro Vancouver real estate market, with the benchmark home price rising 6.2% to $647,000. Whistler’s 0.2% benchmark price increase, to $457,100, was the weakest in the region.

gkorstrom@biv.com

Kafka Esq. posted:

Okay, is it at all possible that Toronto and Vancouver will crash but leave the wider FIRE sector alone?

Cultural Imperial posted:

Can you cite any sources? I'm not saying you're wrong. I think your view is interesting but I think you place too much faith in a rational market.

Rutibex posted:

No sources or anything, just seems like it would work that way. You're likely right though the markets are quite myopic. Traders don't think about something like a political deadlock making the US government default. You can't quantify politics and feed it into a risk model so it's just ignored.

Kafka Esq. posted:

Okay, is it at all possible that Toronto and Vancouver will crash but leave the wider FIRE sector alone?

Cultural Imperial posted:

To quote @ac_eco,

https://twitter.com/ac_eco/status/496781176166973441

This just in, Canadians are dumb as gently caress.

quote:

Canadians have become the least optimistic since February about the outlook for the economy as global policy makers pare projections for growth.

The share of Canadians who think the economy will improve over the next six months declined to 17.8 percent in the week ended Aug. 1, from 21.2 percent the previous week and as high as 23.7 percent in early July, according to polling by Nanos Research Group for Bloomberg News. The average this year is 21.5 percent.

Bank of Canada Governor Stephen Poloz cut his forecasts for economic expansion last month, predicting the world’s 11th-largest economy will take two years to return to full output, in part due to what he called “serial disappointment” in global growth. That pessimism was reflected in a July 24 International Monetary Fund report that cut its projections amid growing concern that geopolitical risks, such as Middle East unrest, will rattle the world economy.

“The slide in consumer confidence over the past week was a result of more pessimistic views on the strength of the economy,” said Nik Nanos, chairman of Ottawa-based Nanos Research Group.

The Bloomberg Nanos Canadian Confidence Index fell to 58.9, from 59.8 the previous week. It was the second straight decline in the survey-based index after it reached the highest in more than four years.

Consumers have grown more bearish even amid signs last week Canada’s recovery may be shifting into higher gear. The U.S. economy, the biggest market for Canadian exports, grew at a 4 percent annualized pace in the second quarter, faster than economists forecast. Canada’s output expanded in May at the fastest pace in four months as automakers ramped up output.

Employers in the U.S. added more than 200,000 jobs for the sixth straight month in July. Statistics Canada will report employment figures for July on August 8.

Cut Forecasts

The Bank of Canada last month cut its forecasts for Canada’s growth, to 2.2 percent from 2.3 percent for this year and to 2.4 percent from 2.5 percent next year. Poloz has said growth in exports and business investment needs to pick up in order to have a self-sustaining recovery.

The Nanos index is derived from weekly polling based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20.

The index has two sub-indexes. The Expectations Index, based on responses about the national economy and real estate, slipped to 58.1 from 59.3.

The percentage of those predicting higher real-estate prices over the next six months dropped to 43.9 from 44.4. The gauge has averaged 40.4 in 2014. The share of those expecting a decrease in prices rose to 13.1 percent from 12.5 percent.

Pocketbook Index

The Pocketbook Index, based on responses about job security as well as personal finances, fell to 59.8 from 60.2 the previous week.

The proportion of people who describe their job as at least somewhat secure slipped to 67.5 percent from 67.9 percent. The 2014 average is 66.7 percent.

The percentage of those who think their finances were better off in the last six months fell to 18.4 from 18.6. That indicator has averaged 19.5 percent this year.

quote:

Canadians bearish about the economy but bullish on housing. How does that make any sense?

quote:

For the first time since 1997, today saw the release of the sixth consecutive U.S. jobs market report with a net monthly employment gain of over 200,000 persons. But are they doing better than Canada, and if so, by how much?

The difficulty with direct U.S. to Canadian employment comparisons is the differences in size of the two countries. We can account for this difference by measuring employment growth relatively to the overall level of employment in each country. Here is year-over-year employment growth for Canada and the U.S. as a percentage of the overall level of employment since January 2010.

quote:

The U.S. employment market was dreadful in 2010, but has improved steadily since then. The scale required to show the 2010 numbers makes it difficult to see the relative differences in the last few years, so here is the same data starting at January 2011:

quote:

By this metric, U.S. employment growth outpaced Canadian growth in 2012 and 2014. The two countries were relatively even in 2013 outside of two bad months (February and October) for the United States.

The above charts treat full-time and part-time jobs equivalently. If we instead limit the discussion to full-time employment, the U.S. record is even stronger.

quote:

The United States has outperformed Canada by this metric in 23 of the 30 months from January 2012 to June 2014 (the Canadian July 2014 data has yet to be released), with the U.S. averaging 1.34 per cent growth relative to Canada’s 0.97 per cent. Full-time employment has grown by 2.3 million in the last year—64 times Canada’s paltry 35,600 net gain. Given Canada’s performance gap over the past two-and-a-half years, it is getting more and more difficult to claim that Canada “strongest job-creation record in the G7.”

Mr. Wynand posted:

Kalenn Istarion posted:

Rutibex posted:

No sources or anything, just seems like it would work that way. You're likely right though the markets are quite myopic. Traders don't think about something like a political deadlock making the US government default. You can't quantify politics and feed it into a risk model so it's just ignored.

Actually that's not true at all; as I noted it's a big part of why the US government lost its AAA rating and is trading at a discount to Canada. Traders are very aware of and take account of large binary risks. I know the debt desk at the place I used to work spent a great deal of time figuring out what default scenarios might look like and how they would impact price.

Mr. Wynand posted:

That trend line does not at all seem out of whack with population growth:

Mr. Wynand posted:

Or disposable personal income:

eXXon posted:

And why should the price of housing track incomes either?

tagesschau posted:

Actually that's not true at all; as I noted it's a big part of why the US government lost its AAA rating and is trading at a discount to Canada. Traders are very aware of and take account of large binary risks. I know the debt desk at the place I used to work spent a great deal of time figuring out what default scenarios might look like and how they would impact price.

Mr. Wynand posted:

Either way, my faith is shaken Canada Housing Thread. Vancouver is still expensive relative to the rest of Canada yes, but it's still moving in the same general direction as it. If some all-consuming economic cataclysm is imminent, it would have to do with the trend starting in the early 90s and before, because nothing really stands out for just the past decade or so.

quote:

“It’s like if the tree in the
backyard has a crack in
it, you worry it’s
vulnerable to a storm.
But if no storm happens,
it goes on and on, and
maybe eventually
strengthens through
growth. If the right storm
comes along and knocks
it onto your neighbour’s
house you’ve got a problem.”
This spring, our Bank Governor, Stephen Poloz,
described the Canadian housing market this way. I
think it’s an excellent metaphor. If the key factors that
support real estate stay as they are – low interest rates
and a reasonable job market – then prices will stay
high. But if one of those factors become hostile, the
market is defenseless.
He made a further comment, however, that I disagree
with (if I understand it correctly). He said house prices
are “vulnerable but not risky. The distinction is
important.” There may be a distinction, but I think they
both apply.
It was Governor Poloz’ comments that prompted me to
bundle up the following observations that have been
accumulating in my real estate file. Before I start,
however, let me provide some context.
Bent but not broken
I’ve been cautious about real estate for a few years
and decided to get more vocal in 2012 (Real estate as
an investment? Look elsewhere). At that point, I saw
the risk of a bad outcome increasing. The cycle had
been going on seemingly forever and all the valuation
measures I looked at were at extremes, as was the
selling and buying behavior.
As I write about real estate again, I acknowledge that
I’m moving out of the category of being ‘early’ to being
‘wrong’. If too much time passes, the two become
indistinguishable. But I still feel the same way and am
willing to take the risk of commenting further on this
rather passionate topic.
At Steadyhand, we’re always trying to have most of our
clients’ money invested in assets that are undervalued
and have a margin of safety built in. Conversely, we
want as little as possible in overpriced assets. I
continue to believe that in general, Canadian
residential real estate is in the latter category.
Symmetry
I’ve said many times that there are two things we know
for sure about economic and market cycles: (1) it’s
impossible to call the beginning or end, and (2) long,
spectacular upswings don’t end with a flat period, but
rather an equally serious retrenchment. Clearly, my
‘earliness’ has again confirmed number one. As for the
second, I can find no reason why this cycle wouldn’t
have its usual symmetry.
Notice, I said ‘cycle’. Ultimately this will be a cycle like
any other. Even if you don’t agree with my points
below, you can’t deny that real estate is a highly
cyclical asset.
One way trade
The commentary on real estate contains some diverse
views (there are a growing number in my camp for
instance), but it’s the behavior of investors, speculators
and families that defines the consensus. And their
behavior is indicating a strong one. Because the
Canadian housing market weathered the 2008/09
storm reasonably well and sailed through the ‘bubble
scare’ of 2012, buyers are confident that prices are
going to stay high.
The basis for this confidence is based on the belief that
we can’t afford higher interest rates, therefore they
won’t/can’t go up. This is the strongest consensus I’ve
seen in many years. Indeed, its strength was confirmed
by a recent question from a client. He asked, “Can
interest rates actually increase?”

Canadians are in a comfort zone right now, or should
we call it a ‘complacency’ zone. Investors should
always be wary when everyone is looking the same
way.
Buy, hold or sell?
If I put my analyst hat on and assess residential real
estate like a stock or industry sector, I’d have the
following notes on my sheet.
• House prices are running well above their long-term
trend, particularly in Toronto and Vancouver.
• Mortgage rates are running well below their
sustainable level. The real yield (after adjusting for
inflation) on Government of Canada bonds is again
approaching zero.
Prices are highly dependent on mortgage rates.
• Canadian balance sheets are stretched. A steady
increase in the use of debt has helped push house
prices higher, but Canadian consumers are now
amongst the most levered in the world (I’m not sure
who is higher).
• Affordability is just OK. According to the RBC
Housing Affordability study, it’s slightly worse than
normal in Ontario and Quebec, and seriously
unaffordable in B.C.
• Price-to-rent ratios are poor. At current prices, it’s
tough to earn a reasonable income after all
expenses.
• Price-to-income ratios are also way above trend.
• Supply levels are reasonable. Outside of condos in a
few markets, the supply of new and used homes is
not excessive. What is not clear, however, is how
many properties are in weak hands – i.e. highly
levered investors/speculators/developers.
• Jobs? My former colleague and economist, Patti
Croft, used to tell me that housing was all about
jobs. If the job market is OK, housing will be fine. I
don’t know what to think on this one. Our biggest
customer, the U.S. economy, is growing and our job
market is tight in many parts of the country, but
meanwhile, Canada has had negative job growth for
three months this year.
• Homeownership rates have increased steadily.
• Demographics are a long-term headwind. For certain
areas and property types, there appears to be a
shortage of supply right now, but over time there will
be more sellers than buyers. The buying cohort
(25-34 years old) is starting to shrink as a percentage
of the population and the over 65 cohort is growing
rapidly.
The Wild Cards
Foreign buyers, inter-generational transfers and the
Canadian dollar are wild cards in my analysis.
Canada is a desirable place to live, and invest, and will
likely continue to be a magnet for foreign money in
search of a safe haven. I struggle with this one,
however, because I never base investment decisions
on capital flows – they can dry up in a heartbeat. When
someone tells me the price of something has to go up
because there’s so much capital chasing it, I run for the
hills.
As for parents helping their kids get into the market,
this trend will likely continue as long as their retirement
funding is secure.
The impact of currency changes is complex and never
clear cut. For instance, a weaker Canadian dollar
means the cost of building and equipping houses will
go up, but it eventually translates into more jobs in the
export industries and better prices for our resources.
On balance, a languishing loonie is a good thing for
real estate.
Income Statement vs. Balance Sheet
Near-zero mortgage rates make it easier to carry a
mortgage on an expensive home. As a result, the
consequence of paying up doesn’t seem so bad – “We
ended up paying $100K more than we wanted, but it
only amounts to an extra $450 a month.”
But current affordability is only one consideration when
a family is making its most important financial decision.
When buying an expensive, illiquid asset, families also
need to have a contingency plan. It has to have a
cushion in case circumstances deteriorate – mortgage
rates rise, job loss, son plays AAA hockey, or a 4th
child.
But even more important to financial viability is the
family balance sheet (assets minus liabilities = net
worth). Debt only goes away if it’s paid off. House price
inflation makes it more bearable, but without it, the

extra 100k will require years and a big chunk of
discretionary income to pay off.
And we should never forget that a highly leveraged
balance sheet exaggerates all outcomes (good and
bad) and makes it hard to deal with setbacks.
What I worry about
I worry about the young families who have stretched to
get into the market in the last five years and are house
poor. They’ve got most of their net worth tied up in
their home and have little or no financial cushion.
I worry a little about the retirees who have a vast
majority of their wealth tied up in one asset
class – their home.
I worry about the impact of a real estate slowdown on
the Ontario and Quebec economies (and therefore, the
Canadian economy). The job situation in Canada right
now is mixed (depending on where you are), even
though the construction and real estate industries are
very strong.
What I don’t worry about
I don’t particularly worry about real estate’s impact on
the Canadian stock market or, by association, our
portfolios. Certainly, a serious contraction in the
housing market will impact many companies - in our
portfolios, TD Bank, Home Capital Group and Loblaw
come to mind. But the Canadian stock market is only
partially driven by what’s going on in our economy. If
the Canadian dollar declines as a result of real estate
weakness, our exporters would be more competitive
and the foreign stocks in our portfolios would be more
valuable.

Will the virtuous circle change direction?
Certainly, I can be accused of being too negative, but I
think bulls and bears alike would acknowledge we’ve
been in an ideal environment for real estate.
• Mortgage rates have steadily declined.
• Credit has been plentiful – “Would you like a
mortgage with that savings account?”
• Canadians have been overspending and willing to
carry a heavier debt load.
• A boom in construction jobs has offset Canada’s
poor competitive situation in other industries.
The Ontario and Quebec governments have delayed
making tough decisions about taxes and spending
(i.e. also living for today).
What does a less-than-perfect environment look like? If
a couple of these price boosters dissipate, or reverse,
a chain of events could turn a virtuous circle into a
downward spiral.
Higher mortgage rates → softer market → less urgency
to buy → sales volumes decline → more supply from
people trying to catch the top → prices weaken →
banks tighten up → speculators experience a cash
crunch → banks tighten up → new projects halted →
construction and other real estate jobs decline → no
urgency to buy → prices weaken further.
As we sit here today, this scenario may seem
implausible, but keep in mind, the cycle has been
working in the same fashion for years on the way up.
What was I thinking?
There’s an exercise I put myself through every once in
a while. I ask myself: In 3 to 5 years, what obvious
thing will I be kicking myself for missing?
What might we be kicking ourselves for in a few years?
“Of course interest rates had to go up. Money couldn’t
be free forever. Duh!”
“How did we ever expect to get a bargain in a bidding
war?”
“How could we justify buying an income property that
generated no income? We were speculating on prices,
not buying an income stream.”
“Why did we think our kids had to own real estate right
out of University? We rented a crappy apartment for
the first five years of our work life.”
Phew … A final word
I’ve been focusing on the negatives intentionally. My
former colleague at PH&N, Peter Guernsey, used to
say when we were looking at a depressed stock, you
need to focus on finding the positives because the
warts are easy to see. The Canadian residential real
estate market is the opposite. We’ve been living the
positives for a long time, so the warts aren’t so
obvious.
All the measures I look at are at extremes. On the
positive side of the ledger are factors that tend to be
transient, subject to change without warning, or just
plain flaky (low carrying cost, foreign buying, bidding
wars), while the negatives are more lasting (prices, cap
rates, debt levels, demographics).
None of the numbers or trends support what
economists and real estate executives are suggesting,
namely that the market will experience a ‘soft landing’,
with prices flattening out or dropping a little. I can’t find
a business cycle that has gone on for this long and
been this good that has ended with a ‘soft landing’.

quote:

A leading credit rating agency says Canada’s most expensive housing market may not be all that affordable for the average family, but despite that no major correction is coming Vancouver’s way.

DBRS looked at 39 markets in Canada, the United States and Australia, releasing its focus feature on Vancouver Wednesday.

“Based on historical data, the Vancouver market does not appear to be significantly overheated,” said DBRS, in the report. “Therefore, a correction of any magnitude may not be justified given the strong fundamentals in the market.”

This month the real estate board of Greater Vancouver said June competition among homebuyers was as strong as it had been since 2011.

Property sales in the region were up 28.9% in June from a year ago while the average sale price of detached home reached $1,200,539.

DBRS acknowledged there are affordability issues and said home prices continue to rise faster than disposable income, “threatening the affordability of housing for many Canadian families” in the market.

DBRS says given the stable economy and the low interest rate environment that could persist for the foreseeable future, it’s hard to envision a correction.

“It is difficult to foresee catalyst that could create a significant price correction in the Vancouver housing market over the medium term,” said DBRS.

In its study, DBRS noted from 1994-1998, Vancouver did have a correction and prices dropped 9% from peak to trough. From 2008-2013, prices increased 1.7% annually through this post recession period. It is over the last year that prices have rebounded with a 9% gain, said DBRS.

The ratings agency also stressed Vancouver has natural barriers that limit development in the city and controlled supply.

At the same time, DBRS says the quality of living in Vancouver is not a factor to be ignored in continued long-term demand.

“Vancouver’s status as one of the Canadian cities with the highest quality of living helps ensure continual population growth, says DBRS. “The city’s diversity and year-round mild weather help attract immigrants, thus keeping demand for housing high.

The agency offered shorter comment on other Canadian cities.

In Calgary, it says a well-paid work force has kept the housing market strong as the city has avoided a worldwide economic recession with its oil and gas economy. DBRS said continued development of new home supply has keep prices stable and it expects more of the same even if the Alberta economy slows down.

In Montreal, DBRS noted its housing price index saw declines from 1990-99 but is up 150% since then. “Housing prices haven’t been strongly impacted by the financial crisis and exhibit a stable, upward trend,” the agency said.

In Toronto, DBRS say restrictions on development allowing it to “expand up but not out” have helped maintain upward pressure on prices.

Financial Post posted:

“Based on historical data, the Vancouver market does not appear to be significantly overheated,” said DBRS, in the report. “Therefore, a correction of any magnitude may not be justified given the strong fundamentals in the market.”

Brannock posted:

Hypothetically, what happens if this bubble never pops? Or if it flattens out and stays steady, never crashes?

Brannock posted:

Hypothetically, what happens if this bubble never pops? Or if it flattens out and stays steady, never crashes?